Seattle-based Omeros has raked in $25 million for its drug discovery technology from a couple of unusual suspects—billionaire Paul Allen and Washington state’s Life Sciences Discovery Fund.

Omeros (NASDAQ: OMER) is collecting $20 million from Allen’s investment operation, Vulcan Capital, along with a $5 million grant from the state fund that aspires to spur more commercialization of biotech ideas in Washington. In an unusual deal structure, both Vulcan and the state agency will have skin in the game with Omeros. Vulcan and the Life Sciences Discovery Fund will be eligible for a percentage of the future profits from partnerships Omeros signs, and they will stand to collect royalties on product sales if the technology paves the way for new drugs against targets on cells known as G-protein coupled receptors (GPCRs).

The deal provides an important new shot of cash for Omeros, which doesn’t have any moneymaking products on the market and didn’t raise as much capital for its drug development programs as it had hoped to in its IPO last year. The new financing will help Omeros push forward with its quest to identify ways to develop treatments that bind with more than 100 GPCR protein targets that have previously been considered “undruggable.”

An estimated 30 to 40 percent of all existing prescription drugs today are made to hit the more accessible forms of these targets, including big brand name therapies for allergies, pain, and mental illness. Merck’s loratadine (Claritin), Bristol-Myers Squibb’s aripiprazole (Abilify), and Purdue Pharma’s oxycodone (Oxycontin) are a few of the drugs that work this way. As anyone following the pharma business knows, companies are desperately looking for new blockbusters like that to replace the revenues they will lose in coming years as patents expire and cheap generic copies emerge.

By investing $25 million in the Omeros discovery technology, Vulcan and the Life Sciences Discovery Fund are essentially taking a piece of the action in a local company that thinks it has found a way to feed the pharma industry and satisfy its hunger for innovative new medicines.

“We see the Omeros GPCR technology as a major disruptive opportunity,” says Steve Hall, the managing director of Vulcan Capital. “Paul Allen is not a short term investor. We see potential to yield new innovation and returns over multiple decades.”

Steve Hall

Terms of the deal are unusual. Vulcan and the Life Sciences Discovery Fund will be eligible to get a “mid-teens” percentage of proceeds from any partnership income Omeros generates up to $1.5 billion. If Omeros generates $1.5 billion in cumulative proceeds from its GPCR program, Vulcan and the state agency will get a 1 percent slice of the subsequent revenue. Vulcan and the state agency will also get royalties on any products generated by the Omeros program. Vulcan is also getting warrants to buy shares in Omeros over the next five years at exercise prices of $20, $30, and $40 a share.

Investors may choke on their morning coffee today when they see those high warrant prices. Omeros, at Friday’s closing stock price, traded at just $7.30.

This is also clearly an unusual step for a state agency, but it’s not hard to see the underlying rationale. Washington state’s Life Sciences Discovery Fund has been whacked by 40 percent budget cuts by state lawmakers once before during the economic downturn. If Omeros can … Next Page »